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Threshold Effect of Macroeconomic Convergence Criteria on Real GDP Growth Rate within the East African Community

Author

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  • Michael Oloo

    (University of Nairobi, Kenya)

  • Mary Mbithi

    (University of Nairobi, Kenya)

  • Martin Oleche

    (University of Nairobi, Kenya)

Abstract

This study investigates how the thresholds set by the East African Monetary Committee (EAMC) have impacted the growth of the East African Countries (Kenya, Tanzania, Uganda, Rwanda, and Burundi). The analysis establishes the actual thresholds supported by a panel data model, running from 2005 to 2020, which are drawn from World Development Indicators data from the World Bank website. The actual thresholds obtained are compared to the thresholds adopted by EAMC. This data was analysed using a Dynamic Threshold Panel model; the results show a slight deviation of the actual (optimal) data thresholds from the thresholds adopted as the EAC criteria for the formation of a Monetary Union. Therefore, there is need to reconsider the thresholds criteria to enable them to become feasible for the member states to achieve so as to form the Monetary Union.

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Handle: RePEc:epw:develo:v:2:y:2022:i:2:id:15067
DOI: 10.24018/ejdevelop.2022.2.2.67
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